Why capital maintenance should be a key development tool ?
AbstractWe study optimal growth model à la Nelson and Phelps (1966) where labor resources can be allocated either to production, technology adoption or capital maintenance. We first characterize the balanced growth paths of a benchmark model without maintenance. Then we introduce the maintenance activity via the depreciation rate of capital. We characterize the optimal allocation of labor across the three activities. Through maintenance deepens the technological gap by diverting labor ressources from adoption, we find that it generally increases the long run output level. Moreover we find that long term output response to policy shocks is slightly higher in the presence of maintenance.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007044.
Date of creation: 01 Dec 2007
Date of revision:
Adoption; Maintenance; Technological gap; Output gap;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-15 (All new papers)
- NEP-DGE-2008-03-15 (Dynamic General Equilibrium)
- NEP-MAC-2008-03-15 (Macroeconomics)
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